Case Law Details
Racily Udyog Vs Commissioner of Central Excise, Kolkata (CESTAT Kolkata)
CESTAT Kolkata held that the Tubular Plate Lead Acid batteries are an integral part of the Solar Power Generating System, are eligible for the benefit of exemption Notification No. 6/2002-CE dated 01.03.2002 as amended.
Facts- During the period from April 2005 to September 2009, the Appellant have cleared the Tubular Plate Lead Acid batteries manufactured by them without payment of duty to the buyers who were engaged in the business of manufacturing solar photovoltaic power generating systems and devices.
Notably, the Appellant cleared the said batteries without payment of duty excise duty in terms of Sl. No. 237 (Read with List 9) of Notification No. 6/2002-CE dated 01.03.2002 and Sl. No. 84 (read with List 5) of Notification No. 6/2002-CE dated 01.03.2002, which exempted non-conventional energy devices/ systems.
The DGCEI, Bangalore Zonal Unit issued the impugned Show Cause Notice questioning the eligibility of the Exemption Notification to the Appellant.
Thereafter, the impugned order confirmed the demand of excise duty by holding that the Exemption Notification was not applicable to the batteries manufactured by Appellant No 1 and also imposed personal penalty on Appellant No. 2.
Conclusion- Held that the the ‘Batteries’ manufactured by the Appellant, which are an integral part of the Solar Power Generating System, are eligible for the benefit of exemption Notification No. 6/2002-CE dated 01.03.2002 as amended. Hence, the demand confirmed in the OIO is not sustainable. Since the demand itself is not sustainable, penalty imposed on Sh Kalyan Das is also not sustainable. Since the Appellant is eligible for the benefit of the above said exemption Notifications, and the demand is not sustainable, we are not going into the other aspects of Limitation and availability of Cum Duty benefit raised by the Appellant.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The facts of the case are that the Appellant No 1(Herein after Appellant) are engaged in the business of manufacturing Tubular Plate Lead Acid Batteries falling under Tariff Heading 85072000 of the First schedule to the Central Excise Tariff Act, 1985, since April 2005. The appellant claimed that these batteries are specifically designed for use in solar photovoltaic modules/ system, to store the electricity generated by solar cells and are an integral part of the photovoltaic module.
2. During the period from April 2005 to September 2009, the Appellant have cleared the said batteries manufactured by them without payment of duty to M/s Sunshine Power Products Ltd. and M/s Sun Power Technologies Ltd. (Buyers), who were engaged in the business of manufacturing solar photovoltaic power generating systems and devices. The Appellant cleared the said batteries without payment of duty excise duty in terms of Sl. No. 237 (Read with List 9) of Notification No. 6/2002-CE dated 01.03.2002 and Sl. No. 84 (read with List 5) of Notification No. 6/2006-CE dated 01.03.2006, which exempted non-conventional energy devices/ systems specified in List 9 and 5, respectively. The Entry 10 of each of the said lists pertained to solar power generating systems and Entry 21 of each of the said lists pertained to ‘parts’ of the goods specified in the preceding entries of the lists.
3. Since the Appellant’s products were to be used in the solar cell module only and the intent of the government was to exempt nonrenewable energy devices, the Appellant cleared their goods by claiming exemption under the S. No. 10 (and also 21) of the Lists 9/5 of the respective notifications. Since the entire turnover of Appellant was wholly exempt in terms of the above said Exemption Notifications, the Appellant did not obtain registration under CEA 1944 and consequently, did not file excise returns during the impugned period.
4. The DGCEI, Bangalore Zonal Unit issued the impugned Show Cause Notice questioning the eligibility of the Exemption Notification to the Appellant on the following grounds.
a) Various other tubular battery manufacturing companies were discharging excise duty on their clearances during the impugned period.
b) The batteries manufactured by Appellant were compatible for multipurpose application.
c) Appellant was not manufacturing solar power generating systems.
d) SSI exemption in terms of Notification 8/2003-CE was not applicable to Appellant since the batteries were being cleared under a brand of the Buyers i.e., ‘Sunshine’.
5. The impugned order confirmed the demand of excise duty by holding that the Exemption Notification was not applicable to the batteries manufactured by Appellant No 1 and also imposed personal penalty on Appellant No. 2.
6. The Appellant contended that they have manufactured lead acid batteries which have specific end use and application in Solar PV Modules, which is proved by the following certificates, expert opinions and documentary evidences:
(1) Opinion of Director, Manipur Renewable Energy Development Agency (an autonomous Govt. Agency under Department of Science and Technology).
(2) Opinion of Managing Director, West Bengal Green Energy Development Corporation Ltd., (A Govt. of West Bengal Company)
(3) Opinion of Centre of Excellence for Green Energy & Sensor Systems, Bengal Engineering & Science University, Shibpur.
(4) Swiss Certificate in favour of the Noticee .
(5) Certificate of registration under CST Act and West Bengal sales Tax Rules, 1995
(6) Certificate issued by the West Bengal Pollution Control Board Permitting to manufacture lead acid batteries (only solar battery assembling and no other purpose).
(7) Specifications for solar Photovoltaic systems issued by Ministry of New and Renewable Energy specifying ‘batter’ as essential part of these system.
7. The appellant submitted that such batteries qualify as integral/ essential component of the solar photovoltaic devices (PV devices). The Appellant further submitted that inasmuch as these batteries are essential component of the Solar Power Generating System, they would quality as ‘non-renewable energy device’ per se which is eligible for exemption.
8. In this regard, they placed reliance on the case of CCE, Delhi-IV V. Rachitech Engineers Pvt. Ltd., 2015 (326) E.L.T. 377 (ri.-Del.), wherein the identical entry of the exemption notification was under consideration. The assessee supplied chimney of M/s ISGEC John Thompson who were manufacturing and supplying the complete boiler system to the end user, which system qualified for exemption under the S. No. 16 of the List 9 of the Notification No. 6/2006-CE dated 01.03.2006, viz. “Agricultural, forestry, agro-industrial, industrial, municipal and urban waste conversion device producing energy”. The department contended that chimney, being a part of the boiler system and not an energy producing device per se, is not eligible for exemption. However, the Hon’ble Tribunal held that chimney, being integral part of non-conventional energy devices/systems, is eligible for the exemption.
9. The said judgment has been followed in the case of Shree Venkateswara Engg. Corporation Vs. CCE, Coimbatore, 2016 (335) E.L.T. 62 Tri.-Chennai), Wherein the benefit of exemption was held to be available to the devices cleared in knocked down condition as parts. Similar proposition was upheld in the case of Walchandnagar Industries Ltd., Vs. CCE, Pune-III, 2018 (363) ELT 984 (Tri.-Mum.).
10. In the case of electric Photovoltaic India Pvt. Ltd., Vs. CCT, 2019 (21) GSTL 319 (MP), the issue was whether sub-station equipment/ grid installed at the site where the solar power generating system was being erected, was eligible for exemption under Entry 71 of schedule 1, which applies only to ‘solar power generating system’. The Hon’ble Madhya Pradesh High Court allowed the benefit of exemption holding that the said sub-station equipment was integral to the functioning of the Solar Power generating system since sub-station helps in evacuation and upliftment of power generated by solar power plant. Thus, solar power generating system was held to include sub-station. The entry was given purposive interpretation keeping govt. policy of promoting renewable sources of energy.
11. The Appellant also relied on the decision in case of Rajasthan Tube Mfg. Co. Ltd., Vs. Commissioner of C. Ex., Jaipur-II, 2016 (341) E.L.T. 475 (Tri.-Del.), wherein it was held that the wordings of notifications should be given a purposeful interpretation i.e., and interpretation which does not frustrate the purpose thereof. Since such exemption which is available to goods and not to the manufacturer, it would be sufficient to show that the goods are consumed in manufacturing the PV devices, in order to claim exemption. It would be incorrect to interpret the benefit of Exemption Notifications to be available only to final manufacturers of PV devices.
12. The Appellant also relied on the decision of the Hon’ble Supreme Court in the case of Lohia Sheet Products. Vs. Commissioner of Customs, New Delhi-2008 (224) ELT 349 (S.C.), which interpreted the term ‘used within the factory’ to hold that it would apply even in relation to the imported scrap and not necessarily scrap generated within the factory in India. The said judgment was relied upon by the Hon’ble Tribunal in the case of CC, Amritsar Vs. Malwa Industries Ltd., 2008 (229) ELT 233 (Tri.-Del.), where again the benefit of excise exemption available to finishing agents, dye carriers etc. and other products and preparations used in the same factory to manufacture textile and textile articles was held applicable to the imported finishing agents, dyes etc. for use in the textile and textile manufacturing units, was also held to be admissible. This case was affirmed by the Hon’ble Supreme Court, reported at 2009 (235) E.L.T. 214 (S.C.).
13. Further, interpreting the identically worded entry [at S. No. 20 of the List 5 of the exemption notification No. 6/2000-CE], the Hon’ble CESTAT, Mumbai, in the case of Pushpam Forgings Vs. CCE-2006 (193) ELT 334 allowed the benefit of exemption on MS flanges, which is a part of a windmill even if they were not consumed within the factory of manufacture and cleared to the site for use in erection of towers which are a part of windmill. The Hon’ble Tribunal opined that by no stretch of imagination it would be possible to assemble a huge structure like a windmill in the factory.
14. Relying on the above said decisions, the Appellant submitted that the benefit of exemption under S. No. 21 of List 9/5 of the relevant exemption notifications is rightly admissible to them since the batteries were used in the factory by the buyers for manufacturing PV devices.
15. Regarding invoking of extended period in the Notice, the Appellant contended that they were under a bonafide belief that the exemption under the relevant exemption notifications was rightly claimed by them, in view of the various decisions cited above. They have not suppressed any information from the department with an intention to evade payment of tax. Everything was available on record in the books of account of the Appellant and no case of unrecorded clearance has been made in the present case. Further, in order to invoke extended period of limitation, the burden is on Department to prove that the Appellant has suppressed information with an intent to evade payment of tax. In the instant case, the SCN as well as impugned order have failed to highlight any positive act on part of Appellant to suppress information or willfully mis-state anything. The mere act of not taking registration and consequent non-filing of returns has been taken as a ground to invoke extended period of limitation, which is legally not sustainable.
16. In support of their claim, they relied upon the decision in the case of D.N. Pandey & Company Vs. CCE & ST, Allahabad – 2019 (28) GSTL 108 (Tri.All.), wherein the Hon’ble Tribunal held that mere failure to obtain registration cannot be a ground to allege suppression with the intent to evade payment of tax .
17. They also relied upon the decision of the Hon’ble Supreme Court in the case of Gopal Zarda Udyog Vs. CCE, New Delhi, 2005 (188) ELT 251 (SC), wherein it has been held that mere failure or negligence on the part of manufacture either not to take out license or not to pay duty in cases where there is scope for doubt, does not attract extended period of limitation.
18. They also argued that similar proposition has been held in the following cases to hold that extended period of limitation is not invocable in similar situations;
(i) Savira Industries Vs. CCE, Chennai-II, 2016 (331) ELT 504 (Tri.-Chennai).
(ii) Easland Combines Vs. CCE, Coimbator, 2003 (152) ELT 39 (SC).
(iii) M.P. Laghu Udhyog Nigam Ltd., Vs. CCE, Bhopal, 2015 (37) STR 308 (Tri.-Del.).
(iv) Future Link India Vs. CCE, Delhi-II, 2017 (48) STR 353 (Del.).
19. In view of the above cited decisions, they contended that extended period is not invocable on account of bonafide interpretation of the Exemption Notifications adopted by the Appellant and also in the absence of any positive act on part of Appellant to have suppressed information from the Department.
20. They also claimed that, without prejudice to the aforementioned submissions, the benefit of cum-duty computation ought to be permitted. Explanation to Section 4 of the Central Excise Act, 1944 provides that the price actually paid for excisable goods to an assesse shall be deemed to be cum-duty price which shall be deemed to include duty payable on such excisable goods.
21. In this regard, they placed reliance on the judgment of the Hon’ble Tribunal in the case of Lubrizol Advanced Materials India Pvt. Ltd., Vs. CCE,. Vadodara -2013 (290) ELT 453 (Tri.-Ahmd.) wherein the benefit of cum-duty was allowed to the assessee upon disallowance of the exemption claimed.
22. Based on the aforementioned submissions, they contended that penalty is not imposable on Appellant No 1. They also claimed that personal penalty is not imposable on Appellant No. 2 since the key ingredients to invoke such penalty under Rule 26 of CER, 2002 are not being fulfilled in this case. In support of this argument, they relied upon the decision in the case of Kamdeep Marketing Pvt Ltd., Vs. CCE, Indore-2004 (165) ELT 206 (Tri.-Del.), wherein the Hon’ble Tribunal held that personal penalty imposed on proprietors ought to be set aside where penalty already imposed on firm.
23. The Department Representative contended that the batteries manufacture by the Appellant were compatible for multipurpose Application. Many other manufacturers of such batteries are paying duty on such clearances. He stated that Sl. No. 237 of Notification No. 6/2002-CE dated 01.03.2002 read with list 9 and Sl. No. 84 of Notification No. 6/2006-CE Dated 01.03.2006, read with List 5 – exempts only ‘Solar Power Generating Systems’. Entry 10 of each of the said lists exempts Solar Power generating systems and Entry 21 of each of the lists exempts part of such systems, provided they are consumed within the factory of production. There is no exemption available to a batteries which are capable of multipurpose use. In support of their claim they cited the decision of Hon’ble CESTAT, New Delhi in the case of Raydean Industries Vs. Commissioner of CGST, Jaipur.
24. Heard both sides. It is observed that Entry 10 of List 9 of the Notification 6/2002 dated 01/03/2002 and Entry 10 0f List 5 of Notification 6/2006 dated 01/03/2006, exempts Solar Power Generating Systems. Entry 21 in the above said Lists exempts Parts of all the preceding Entries in the said Lists. Thus, from the above Notifications, it is clear that the intention of the Government is to promote non conventional Energy systems and for that both the Systems/Devices as well as its parts were exempted. However, as per Entry 21, the Parts are exempted only if they are used within the factory of production. In this case the ‘Batteries’ manufactured by the Appellant is a special type of battery used in solar PV systems. This has been confirmed by the Certificates and Expert Opinions submitted by them. However, there is no specific Exemption available to ‘Batteries’ as such in the said Notifications.
25. In their submission, the Departmental Representative stated that the ‘Battery’ is capable of multipurpose use. Many other similar manufacturers manufacturing such Batteries at places other than the factory of production of Solar Power Generating Systerms are clearing their goods on payment of duty. Accordingly, he contended that the Exemption provided in the above said Notifications are available only to Solar Power Generating Systems and not the ‘Batteries’ since the Battery cannot be considered as a Solar Power Generating System on its own. In support of his argument he relied upon the decision of the Tribunal in the case of Raydean Industries Vs. Commissioner of CGST, Jaipur, 2022 (4)TMI 1155 CESTAT New Delhi, wherein it has been held that ‘Module Mounting Structures’ manufactured elsewhere and supplied to Solar Power Water Pumping Systems are not entitled for the benefit of Entry No 332 of the Notification 12/2012 CE dated 17.03.2012. The relevant portion of the order is reproduced below:
“13. The issue that arises for consideration in this appeal is whether ‘module mounting structures’, which are manufactured by the appellant and which are supplied to suppliers of solar power water pumping systems for irrigating agriculture fields, is exempted from payment of central excise duty in terms of the notification dated 17.03.2012. The appellant claims that such exemption would be available at serial no. 332 of the said notification. The description of excisable goods at serial no. 332 is ‘non-conventional energy devices or systems’ specified in List 8 and the appellant has placed reliance upon serial number (10) of the List 8, which is ‘solar power generating system’. The contention of the appellant is that the notification would not exempt the ‘systems’ mentioned in List 8, but various component comprising the system and since ‘module mounting structures’ is a component of the ‘solar power generating system’, it would be exempted from payment of central excise duty under this notification.
14. It is not possible to accept this contention of the learned counsel of the appellant. What has been exempted from payment of central excise duty under serial no. 332 of the notification dated 17.03.2012 is ‘non-conventional energy devices or systems’ specified in List 8. At serial number (10) of List 8, ‘solar power generating system’ is mentioned. Serial number (21) of List 8 mentions ‘parts consumed within the factory of production of such parts for the manufacture of goods specified at serial numbers 1 to 20’. Only such parts are exempted from payment of central excise duty which are consumed within the factory of production of such parts for the manufacture of goods specified at serial numbers 1 to 20 and not parts of water pumping station. It needs to be noted that entry number (10) of List 8 mentions ‘solar power generating system’ and not ‘module mounting structures’. 15. The Principal Commissioner in the impugned order, has also dealt this issue in the following manner:
“5.6.2 On going through the Notification 12/2012 CE dated 17.03.2012, I find that the said Notification, under Sl No. 332 of the Table mentioned therein, provided exemption from Central Excise Duty to Non-conventional energy devices or systems falling under any chapter of the CETA, 1985 having description as specified in List 8 appended thereto.
5.6.3 On going through the said List 8, I find that it contains/mentions the item “Solar power generating system” at S. No.(10) but the “Mounting Structure for Solar Photovoltaic Module” had not been specified therein. I further find that on being asked by the jurisdictional Superintendent of erstwhile Central Excise Range-V of Division-II, Jaipur vide letter C.No.:CE- 20/RV/Misc./45/2015/336 dated 31.12.2015 to submit clarification as to how the goods cleared were covered under the above said Notification, the noticee vide letter dated 05.01.2016 submitted that the “Solar Power Generating System” primarily consists of (1) Solar Photovoltaic Module (2) Mounting Structure for Solar Photovoltaic Module (fixed tilt or tracking type) and (3) Solar Inverter; that they have been manufacturing and selling Mounting Structure for Solar Photovoltaic Module (fixed tilt or tracking type), which forms an integral part of Solar Power Generating System and is covered under List No.8 to the Notification No.12/2012-CE (SI.No.332).
5.6.4 I also find that as per entry at serial number (21) of the List 8, the exemption from Central Excise Duty was available to the parts consumed within the factory of production of such parts for the manufacture of goods specified at S. Nos. 1 to 20 in List 8, which implies that the exemption is available to the parts only if they are consumed actively within the factory for manufacture of goods mentioned at S. Nos. 1 to 20 in List 8 of the 10 E/52480/2019 Notification 12/2012 CE dated 17.03.2012. Therefore, the contention of the Noticee is clearly devoid of merits.
5.6.5 I further find that the subject Notification 12/2012 CE dated 17.03.2012 was amended by Notification No. 12/2014-CE dated 11.07.2014 by omitting item no. (21) from the said List 8 and inserting a new Serial number 332A and entries relating thereto in the said Table after Serial No.332)
5.6.6 The effect of the said amendment was that the Parts consumed within the factory of production of such parts for the manufacture of goods specified at S. Nos. 1 to 20 of List 8 were removed from Serial No. (21) of the List 8 and were separately included against the newly inserted Serial No. 332A in the Table to the said Notification on fulfillment of Condition No.2 specified in the Annexure to the Table of the said Notification. Prior to the amendment dated 11.07.2014, the Notification 12/2012 CE dated 17.03.2012exempted the parts of goods specified at S. Nos. 1 to 20 of the List 8 subject to the condition of their consumption within the factory of production of such parts for the manufacture of goods specified at S. Nos. 1 to 20. After the said amendment in the Notification 12/2012 CE dated 17.03.2012 vide Notification No. 12/2014-CE dated 11.07.2014, the exemption was made available to the parts of goods specified at S. Nos. 1 to 20 of the List 8 in both the situations – (i) when consumed within the factory of production for the manufacture of the goods specified in the List 8 and also (ii) when used elsewhere than in the factory of production i.e. on as such clearance from the factory of manufacture i.e. without being further used in the factory for manufacture of the goods specified in the List 8. However, the exemption in case (i) above was available subject to the Condition that the said parts are consumed captively within the factory of production for manufacture of goods specified at S. Nos. 1 to 20 of List 8; whereas the exemption in case (ii) above was available subject to the Condition of compliance with the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001.” (emphasis supplied)
16. The Principal Commissioner has rightly concluded that the serial number 10 of List 8 refers to ‘solar power generating system’ and not to ‘module mounting structures’ manufactured by the appellant and only parts consumed within the factory of production of such parts for the manufacture of goods specified at serial numbers 1 to 20 of List 8 are exempted from payment of central excise duty.
17. The Principal Commissioner has also correctly appreciated the effect of the amendment made on 11.07.2014 to the aforesaid notification dated 17.03.2012. According to the Principal Commissioner, prior to the amendment only parts consumed within the factory of production of such parts for the manufacture of goods specified at serial numbers 1 to 20 of List 8 were exempted, but after the said amendment the exemption is also available to parts of goods specified at serial numbers 1 to 20 of List 8 in a situation where it is consumed not only within the factory of production for the manufacture of goods specified in List 8 but also when used elsewhere than in the factory of production, subject of course to the condition that the procedure laid down in the relevant rules has been followed.
18. It is, therefore, not possible to accept the contention of learned counsel for the appellant that the ‘module mounting structures’ should be granted exemption from payment of excise duty in terms of the notification dated 17.03.2012 and not the ‘solar power generating system’.
19. Learned counsel for the appellant placed strong reliance upon the judgment of the Madhya Pradesh High Court in Belectric Photovoltaic Tax. This judgment would not help the appellant. A writ petition was filed in the Madhya Pradesh High Court to assail the order passed by the Commissioner of Commercial Tax rejecting the application filed by the petitioner therein contending that the articles used for installing ‘solar power generating system’ are exempted from Value Added Tax. The State Government had framed a policy providing incentives to a developer, including exemption from Value Added Tax and at serial number 10 ‘solar power generating system’ was mentioned. The contention of the appellant was that the existence of a substation was an essential practical requirement of ‘solar power plant’ and, therefore, this was also covered under the exemption. It is in this context that the Madhya Pradesh High Court observed as follows:
“18. Even by taking into account the aforesaid judgment, this Court is of the opinion that power generating system includes all components even the grid/goods related to substation, without which, the system cannot work.
19. The policy framed by the State Government otherwise will have no meaning. The policy was framed keeping in view global warming and resultant climatic changes and all kinds of incentives have been provided for setting up of solar power based projects in the State of Madhya Pradesh. It is really unfortunate that instead of promoting such projects, all kind of hurdles are being created on the ground of technicalities, on the ground that exemption notification is not clear, as has been done in the present case. Once an exemption has been granted in the matter of Value Added Tax/Entry Tax for setting up solar power based projects, the exemption has to be given in respect of a complete project, as all the equipment used in the project are integral part of the project and even without one of the equipments, the project cannot function. Once the entry includes “Solar Power Project”, all the material equipments used for the purposes of setting up power based project are certainly entitled for grant of exemption.
20. In the considered opinion of this Court, the Learned Commissioner, with a total non-application of mind, has passed the impugned order, and therefore, the impugned order dated 25-3-2017 passed by the Learned Commissioner deserves to be quashed and is accordingly quashed. The 13 E/52480/2019 respondents shall grant exemption under Entry No. 71(10) in respect of sub-station equipment/grid and all other equipments supplied by the petitioner during the course of execution of its works contract, as they form integral part of solar power generating system. Recovery, if any, on account of impugned order dated 25-3-2017 also stands quashed. The petitioner shall be entitled for all consequential benefits.”
20. The Madhya Pradesh High Court was examining a policy framed by the State Government which was different from what is contained in the notification dated 17.03.2012 under consideration. It is seen that the notification dated 17.03.2012 while describing the excisable goods refers to ‘non-conventional energy devices or systems specified in List 8’. Entry 21 of List 8 deals with ‘parts consumed within the factory of production of such parts for the manufacture of goods specified at serial numbers 1 to 20’. It is only such parts which are exempted from payment of central excise duty. Such an entry is not contained in the policy of the State Government that was being examined by the Madhya Pradesh High Court.
21. An exemption notification has to be strictly construed, as was observed by the Supreme Court in Commnr. of Customs (import), Mumbai versus M/s. Dilip Kumar and Ors.8 and in Larsen & Toubro Ltd. versus Commissioner of Central Excise, Hyderabad9.
22. The distinction sought to be drawn by the learned counsel for the appellant between ‘devices’ and ‘systems’ is not of relevance to the present case because both non- conventional energy devices or systems specified in List 8 are covered by the description of excisable goods.”
26. The Ld. Advocate for the Appellant stated that as there were contrary decisions on the subject matter, the issue was referred to the Larger Bench, in the case of “Reed Medway Packaging Co. of India Pvt. Ltd.. In that case, the Larger Bench held that there was no conflict in the said two decisions referred to Larger Bench. Both deals with different issues while considering the Exemption under the same Notification.
27. From the decision of the Larger Bench, we observe that if the part/device manufactured by the Appellant can be considered as an integral part of the non-conventional Energy systems, then the exemption under Notification 6/2002, dated 01/03/2002 as amended, is available. On the other hand, if it is only a part of the system which has no independent function on its own which cannot be called a device with independent function and cannot be called an integral part of the System, then the exemption would available only if the part is manufactured and consumed within the factory. The relevant paras of the above said Larger Bench decision is reproduced below:
“7. We have heard both the sides and perused the appeal records. First of all, we note that there is no conflict between the two decisions cited by the Division Bench. In Rachitech Engineers Pvt. Ltd. – 2015 (326) E.L.T. 377 (Tribunal-Delhi), the Tribunal held that there is no dispute that the chimneys manufactured by the appellants are meant for biomass burning boilers. It was further observed that there is very thin distinction between part and device, as the device is thing made for a particular purpose and since chimney being an internal part of the biomass fired boiler can be treated as a device for non-conventional energy device/systems, the exemption under this notification would be available to the chimneys. We note that in fact, the Tribunal was deciding the availability of the exemption to a specific item (chimney) in terms of Sl. No. 16 of the List 9.
8. In Gerb Vibration Control Systems (P) Ltd. – 2008 (223) E.L.T. 390 (Tribunal-Bang.), the Tribunal specifically examined the entitlement of the appellant under Sl. No. 21 of the said notification. It was held that in terms of the said entry, the parts should be consumed within the factory of production. In such situation, the exemption was denied to the appellant for non-fulfilment of such condition. As can be seen, these two cases dealt with different issues, while considering the exemption under the same notification.
9. It is pertinent to note that in the submissions before us, the ld. Counsel for the appellant categorically asserted that the certificate for exemption issued by the Non-Conventional Energy Development Corporation of Andhra Pradesh Ltd. is for the exemption under Sl. No. 16 of the List 9 of the said notification. No claim for exemption is being made under Sl. No. 21 as “parts”. That being the case, we note that there is no dispute to be resolved by the Larger Bench as the appellant is claiming exemption only under Sl. No. 16. Eligibility of the appellant for exemption under Sl. No. 16 has to be examined by the Division Bench considering the scope of the said entry and the nature of the impugned goods for which exemption is claimed.”
28. In the present case, Exemption is provided to Solar Power Generating Systems. The Appellant manufactured ‘Batteries’ and supplied the same to the two manufacturers of Solar Power Generating Systems. The Experts Opinions submitted by the Appellant clearly indicate that they are specially made Batteries to store electricity generated by solar cells and an integral part of the solar Photovoltaic Module. They have an independent function on its own and hence can be called as a ‘Device’ on its own for the purpose of the Notification No. 6/2006-CE Dated 01.03.2006 and hence as per the Larger Bench decision cited above the exemption can be made available to the Batteries
29. The Learned Departmental Representative cited the decision of the Hon’ble Supreme Court in the case of Commissioner of Customs (Import) , Mumbai Vs Dilip Kumar Company 2018 (361) E.L.T.577( S.C) and argued that in Taxing Statutes the words must be interpreted strictly, irrespective of the consequences. The Gist of the decision is reproduced below.
“Tax exemption under a Notification – Burden to prove for its entitlement is on assessee claiming exemption – If there is any ambiguity in exemption Notification, benefit of such ambiguity cannot be claimed by assessee and it must be interpreted in favour of Revenue – Ratio of Supreme Court judgment in Sun Export Corporation [1997 (93) E.L.T. 641 (S.C.)] and all decisions taking similar view as in Sun Export Corporation (supra) overruled – Notification No. 20/99-Cus. – Section 25 of Customs Act, 1962 corresponding to Section 11 of Central Goods and Services Tax Act, 2017 and Section 5A of Central Excise Act, 1944. [paras 27, 40, 41, 43, 47, 48, 52]
Taxability – Interpretation of taxing statute imposing tax liability on assessee – Burden to prove tax liability of an assessee is on Revenue – In case of any ambiguity in a taxing statute imposing tax liability on the assessee, benefit of doubt to be given to assessee. [para 43]
Interpretation of statutes – Statute must be construed according to the intention of Legislature – General Clauses Act applicable if while interpreting a statutory law, any doubt arises as to the meaning to be assigned to a word or a phrase or a clause used in an enactment and such word, phrase or clause is not specifically defined – Notwithstanding this, when there is repugnancy or conflict as to the subject or context between General Clauses Act and a statutory provision which falls for interpretation, Court must necessarily refer to the provisions of statute. [paras 15, 18]
Interpretation of statutes – Words in a statute when clear, plain and unambiguous and only one meaning can be inferred, Courts bound to give effect to the said meaning irrespective of consequences – In applying rule of plain meaning any hardship and inconvenience cannot be the basis to alter the meaning to the language employed by the legislation especially in fiscal statutes and penal statutes. [paras 19, 20]
Interpretation of taxing statute – Tax liability – Regard must be had to the clear meaning of words and matter should be governed wholly by the language of the notification, equity or intendment having no place in interpretation of a tax statute – If words are ambiguous in a taxing statute (not exemption clause) and open to two interpretations, benefit of interpretation is given to the subject. [paras 25, 26, 28, 43]”
30. From the above decision of the Hon’ble Supreme Court, it is observed that a statute must be construed according to the intention of the Legislature. In the present case, there is no doubt that the Legislature wants to extend the benefit of Exemption to Non-Conventional Power Generating Systems. It is a policy decision of the Government to promote Renewable sources of energy. In many cases the entire system cannot be manufactured within the factory. The fully finished system will come into existence only at the site after assembly of various parts. It is practically impossible to bring into existence a fully finished system within the factory. Just because the fully finished system comes into existence only at the site, the benefit of exemption available to the System cannot be denied to the ‘parts’, which are an integral part of the system. We find that this view has been held by the Hon’ble Tribunal in the case of Pushpam Forgings Vs CCE – 2006 (193) ELT 334. The relevant portion of the order is reproduced below.
“2.1 The admitted position is M.S. Flanges are parts of Wind Mill Tower, which in turn is part of a WOEG following. “(Tribunals decision in case of C.C.E. v. Techno Fab Manufacturing Ltd. – 2003 (158) E.L.T. 515 has held tower to be a part of the Wind Mill.
2.2 Once tower is accepted and found and held to be part of Wind Operational Electric Generator (WOEG for short) it is to be held that part i.e. flange of this part i.e. tower will be part of the whole i.e. Wind Generated Mill producing electricity from unconventional services. Every devices/systems part in this case having been specifically designed for that purpose in mind. That part of part is part of whole is well settled, relying upon [CCE v. Mahendra Engineering Works – 1993 (67) E.L.T. 134 followed in Bensel Industrial Corporation – 2000 (118) E.L.T. 119]. We find the ‘flanges’ to be a part of WOEG.
2.2 The restriction being given to the exemption as part of the tower by reading Sr. No. 20 of lists, only on the grounds that flanges were not eligible since they were not consumed in the factory of production for the manufacture of tower has to be considered with the fact that tower of a Wind Mill being huge structures would only came into existence in the factory of manufacture as a design & in fact they would arise only infact at site after assembly using the flanges. Consumption at site in tower is not questioned on facts nor it can be said that flange is not used where the tower came into existence. The concept of interpretation of “consumed in factory of production” & limiting the same to the Central Excise registered premises of the appellants herein & deprive the use at site cannot be upheld.
2.3 In any case, the flange being part of tower which is Essential Component of Wind Operated Electrical Generator, an unconventional energy service device, would be eligible under Sr. No. 5 if not under 20 as part of Sr. No. 1 to 19. Coverage is also to be available under Sr. No. 13 of list 5.
2.4 The reliance placed on the decision of Damodar I. Malpani – 2002 (146) E.L.T. 483 (S.C.) & submission of invoices of other manufacturer having been exempted, is well founded. That would induce us to uphold the exempted status to be arrived in this case.
2.5 Classification declarations were filed by the appellant the goods M.S. Forged Flanges (Machined) with the exemption claim under Sr. No. 251 last 5 & Remark column having an Entry ‘Wind Mills’ spares & parts (for wind operated electricity generators). We find when “the Board has cast an obligation on the department vide Circular No. 124/35/95-CX. dtd. 10-5-95 to scrutinize the declaration, therefore the finding on suppression as arrived by the Ld. Adjudicator is this order, para 10, of deliberate omission of Sr. No. to involve the Proviso clause & lift the bar of limitation cannot be upheld. As the order does not indicate any other objection of the verification if any, done by the officers. Since the appellants belief of the product being covered on different Sr. No. was well founded & there was no stipulation of reporting the same. Surely if claim is entitled under alternate Sr. No. the same have to be granted. Suppression of fact cannot be arrived. Same has to be of a fact which would disentitle the claim of exemption, if revealed. No such fact is brought out in the order or pleaded before us. The bona fide belief & in view of Boards circular that part of Tower & Tower being part of Wind Operated Electricity Generators would favour the appellant with the bar of limitation to be available in his favour in this case.
2.6 When our findings on merits about eligibility to Notificate, & bar of limitation to be in favour of the appellants, we cannot find any reason to uphold any demands of duty or penalty or interest in this case. The same are set aside.”
31. Thus, we find that the the ‘Batteries’ manufactured by the Appellant, which are an integral part of the Solar Power Generating System, are eligible for the benefit of exemption Notification 6/2002 dated 01/03/2002 as amended. Hence, the demand confirmed in the OIO is not sustainable. Since the demand itself is not sustainable, penalty imposed on Sh Kalyan Das is also not sustainable. Since the Appellant is eligible for the benefit of the above said exemption Notifications, and the demand is not sustainable, we are not going into the other aspects of Limitation and availability of Cum Duty benefit raised by the Appellant.
32. In view of the above discussion, we hold that the ‘Batteries’ manufactured by the Appellant are eligible for the benefit of exemption Notification 6/2002 dated 01/03/2002 as amended. Accordingly, we set aside the Order-in-Original and allow the Appeal filed by the Appellant, with consequential relief, if any.
(Pronounced in the open court on 11th April, 2023…)
Author Bio
